Wednesday, February 20, 2013

From time to time we like to take a step back from Quant’s elite ranks for a broader look at the top 100 funds which on average outperform the S&P 500.  Readers know Quant has had a US focus throughout this young year and while that is still the case we have seen some foreign funds creeping up in the rankings.  But today we are going to look at the sectors represented in the top 100.

When we last performed this exercise on January 17th, the Energy sector was Quant’s 3rd favorite, today it’s the most favorite with 10 funds from the ETFGsm Global Energy Index scoring among the top 100 with XLE and XOP at 2nd and 4th place.  The average risk rating on the group is 4.56, higher than the top 100 overall.  Information Technology was the favorite sector last month and while its ranks have lessened, it still has 6 funds in the top 100 with 2 in the top 25, IGM at 17th and IYW at 24th place.  Those 6 funds have an average Risk Rating of 3.89, in line with the top 100 average.  5 Basic Materials funds made the cut last month and that’s the case again this month, tying that sector for Quant’s 3rd favorite.  The highest ranker in this group is our old friend GDX dropping down to 9th place this morning.  Its disappointing performance has driven its Risk Rating up to 6.14 higher than most equity ETFs but in the middle of the range for Basic Materials funds.  The Health Care sector is looking better in Quant’s eyes also with 5 funds in today’s top 100 where XLV gets as high as 22nd place.  We know Quant has been favoring lower risk names and that group of 5 has a low average Risk Rating of 2.48.  The 4 Industrial funds in the top 100 have an average Risk Rating of 3.91 which comes down to 3.43 when we remove FAA which announced it will be closing.  The best ranking of the remaining 3 is XLI in 8th place overall with a low 2.09 Risk Rating.  As Quant becomes more enamored with lower risk names, Utility funds are scoring better.  2 of them make the top 100 today with PSCU getting as high as 36th place with a Risk Rating of 2.39.  That’s beaten by 51st place XLU and its even lower Risk Rating of 1.84.  The ETFGsm Global Consumer Discretionary and Staples indices each have one of their constituents in today’s top 100.  XRT represents the cyclicals at 22nd place and XLP represents the staples at 33rd place with the latter having a lower Risk Rating of 1.51 compared to the former’s 3.66.  Telecommunications and Financials see none of their index constituents anywhere near the top 100 today, each has a constituent getting as high as the mid 200 ranks.

Today’s list sees fewer names in most sectors making the top ranks as Quant has been favoring more broad market issues with lower Risk Ratings like the S&P 500 and Russell families of funds.  Better scores among Utility funds is another noticeable takeaway from today’s exercise.  The average Risk Ratings of the top groups has increased slightly with the top 25’s creeping above 4 but the top 10 and top 100 still average below that threshold.  That increase is largely attributable to foreign funds scoring better but we will have to hold that analysis for another day.  Thanks for reading today, we should be announcing our exciting news before the weekend so don’t forget to check back.

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